Wednesday, March 26, 2008

NOW Couriers look likely to deliver for Freightways

New acquisition NOW Couriers should help Freightways
continue to dominate the growing Auckland delivery market.

News yesterday that the New Zealand courier and document information management company Freightways [FRE] is to buy the small Auckland courier company Now Couriers for around NZ$11 million should be welcome news for shareholders.

Not only that, the faith Freightway's management have in the long-term future of their business with this purchase, during the current economic downturn and associated credit crunch is a positive move, when every other business in New Zealand seems to be talking gloom and doom.

Freightways as a whole, has managed to ride out the economic slowdown and increased business costs very well. It has still managed to grow revenue and profit slightly over the last year.

Their core courier business seems to be one of the most resilient divisions and Auckland especially seems reasonably bullish.

NOW has 40 contracted owner drivers servicing greater Auckland, and is at the budget end of the market, so it compliments Freightways other brands: Sub 60, Castle Parcels, New Zealand Couriers, Post Haste and several other brands.

Management want to keep the latest acquisition separate from the others as it wants to differentiate it from its other nationally focused brands.

I like the way management have had a partnership with NOW for several years, got to know the company well and then bought control. Too many companies rush into these sorts of acquisitions and that is where things can go horribly wrong. Freightway's management clearly have a good understanding of this business and that way the price they paid for it is more likely to be relevant to its earnings, prospects , and its long term future.

Their track record on "bolt-on" acquisitions is extremely good.

CEO Dean Bracewell has been a diligent head and the tough outlook for the New Zealand economy looks to be something he looks forward to with relish.

The future outlook by Bracewell is tempered by comments of influences from the local economy and that they are well positioned to grow when economic conditions are rosier.

He expects the core package delivery businesses to perform "soundly" and its fast growing documents division to be strong over the coming year.

Related Share Investor reading

Freightways packages up a good result
Freightways delivers

Disclosure: I own FRE shares

c Share Investor 2008